Nivalis axes CEO, 80% of staff after failed cystic fibrosis trial

An axe in a stump
Nivalis' restructuring will reserve cash while it figures out a way forward

Nivalis is laying off 80% of its staff including its CEO and CMO. The radical restructuring will allow Nivalis to hunker down while it figures out what to do with its failed cystic fibrosis program, $45 million cash pile and Nasdaq listing.

Once the layoffs are completed at the end of March, Nivalis will have five employees, down from 29 full-time staffers as of the end of the last financial year. The cuts start from the top down, with both CEO Jon Congleton and CMO David Rodman among the people now out of work.

Nivalis is making the cuts in response to the failure of its lead candidate, cavosonstat, to move the needle in a phase 2 trial. Investigators had hoped adding cavosonstat to Vertex Pharmaceuticals’ Orkambi would improve absolute percent predicted FEV1 in cystic fibrosis patients with two copies of the F508del-CFTR mutation. However, Nivalis’ CFTR modulator failed to beat placebo, causing its stock to crater.

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Boulder, CO-based Nivalis started 2017 by revealing it is seeking strategic alternatives for its cash and assets while wrapping up a trial of cavosonstat in patients who are taking Vertex’s Kalydeco. The trial is due to end this quarter, beyond which Nivalis has little need for the R&D team it built to advance its cystic fibrosis programs.

“Nivalis is committed to maximizing shareholder value by preserving the company’s cash, and unfortunately this necessitates the announced restructuring,” Nivalis Chairman Howard Furst said in a statement.

The phase 2 failure has taken a lot of the lustre off cavosonstat, but Nivalis still has a few things going for it. Notably, it has a Nasdaq listing, an asset that makes it a target for a reverse merger with a company seeking to go public without going down the traditional IPO route.

Medivation, Puma Biotechnology, Synageva BioPharma and Tobira Therapeutics all got their starts on public markets through reverse mergers. Three of those companies went on to be bought in multi-billion dollar deals, and the fourth, Puma, has a market cap of $1.2 billion.

Those success stories have burnished the reputation of reverse mergers, helping to create demand for shell companies. And with lots of companies having gone public during the biotech boom years only to flop, there is supply to meet this demand. Miragen Therapeutics, Otic Pharma and PLx Pharma have all taken this route onto Nasdaq in recent months.

With Nivalis expecting to have $45 million to $47 million in the bank and low costs once the restructuring is complete, it is equipped to wait until the next biotech comes looking for a shell or push ahead with a different use of its assets.

Responsibility for overseeing this process will fall on CFO Michael Carruthers, who will take on the role of interim president as of next week.

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